Walmart slows push to add third-party sellers to its online marketplace

Discussion
Photo: Walmart
Apr 11, 2018
George Anderson

As Walmart was posting quarterly online sales gains of 50 percent or more last year, the company often mentioned added SKUs as a factor in its success. Many of those SKUs came from third-party sellers on the walmart.com marketplace. While the retailer continues to add to its roster of third parties, the pace of new additions has slowed, according to research from Marketplace Pulse.

According to a Bloomberg report, the slowdown in new marketplace sellers coincides with a drop in Walmart’s U.S. e-commerce sales from 50 percent growth in the third quarter to 23 percent in the fourth. Walmart is tapping the brakes on marketplace sellers at the same time that most others are putting the pedal to the metal, according to Marketplace Pulse.

On the chain’s fourth quarter earnings call, Walmart CEO Doug McMillon said the number of SKUs on its marketplace had grown to 75 million. Marketplace Pulse puts the number of third parties selling on walmart.com at 18,000.

“We’re focused on adding the best items our customers want from the best sellers,” Ravi Jariwala, a spokesperson for Walmart, told Bloomberg. “In any given month, the number of new marketplace sellers added to our platform may fluctuate as we continuously add new items and offer customers an expanding range of choices.”

One possible explanation for Walmart’s apparent third-party seller slowdown is the company’s focus on its own digital brands. Walmart under the direction of U.S. e-commerce chief Marc Lore has been on a buying spree since acquiring Jet.com in 2016.

In addition to Jet, Walmart has acquired Shoebuy, MooseJaw, Modclothn and Bonobos. It launched Allswell, an upscale mattress and bedding site, in February.

“We buy companies we can help accelerate,” Mr. Lore said at Shoptalk last month. “Our M&A strategy has been to buy companies with great content, great relationships and innovation.”

DISCUSSION QUESTIONS: Why do you think Walmart, if true, is slowing the pace at which it is adding new sellers to its marketplace? Do you think Walmart is following a sound strategy for the addition of third-party SKUs to its online site?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"I think the problem with having too many sellers in your marketplace is quality control. So I think it's a very good move."
"This slowdown may be a result of taking steps to put controls into place."
"Another reason behind this is that Walmart is now focusing on margin and not simply sales."

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19 Comments on "Walmart slows push to add third-party sellers to its online marketplace"


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Neil Saunders
BrainTrust

As much as having a “long tail” of products is useful for online merchants, there is a balance to be struck. Consumers do not always want a gazillion items to choose from; they want reasonable choice that is well curated. Secondly, as Walmart already has an established and very comprehensive offer, it has to minimize cannibalization of its own ranges.

Charles Dimov
BrainTrust

There are many possible reasons that might explain why Walmart is slowing its pace. But is it a good strategy for Walmart to keep pushing third-party SKUs? YES. Today, Amazon owns the lion’s share of the online market and marketplaces. Walmart has a chance of improving its position, balancing out the playing field and giving customers more options. Raising the water level floats all boats. In this case a stronger and healthier alternative third-party marketplace should pay dividends to Walmart in the long run. I just hope they won’t change their long-term strategy based on a short-term bump along the journey.

Keith Anderson
BrainTrust

Marketplaces are an efficient way to massively expand selection without absorbing inventory risk or necessarily overwhelming an existing logistics network.

But marketplaces also invite complexity in areas like product quality and authenticity, pricing and customer service.

Balancing growth with stability and customer experience is a never-ending journey.

Phil Chang
BrainTrust

It’s too many SKUs in a retail environment. Think of it this way. In a real, marketplace — one that you would physically walk — how many aisles do you go through until everything looks the same? Endless aisles are exactly that — endless. When does a consumer stop looking? With so many products, consumers need curation. They need recommendations, product information and trusted people to guide them.

I like this strategy. Adding SKUs isn’t going to make more sales. At some point, marketplaces like Walmart’s or Amazon (or any other for that matter) are going to need some support and guidance so consumers aren’t mindlessly sifting through SKUs.

Paula Rosenblum
BrainTrust

I think the problem with having too many sellers in your marketplace is quality control. So I think it’s a very good move.

Also, having received one “Third-Party Prime” shipment from Amazon wrapped in Target tape, and another one in a Walmart box, I’m thinking that Walmart believes it can do better on its own. I think the marketplaces are great for new retailers selling “cool stuff,” but there’s no need to have 10 sellers of paper towels.

I don’t think this will go so well for Amazon over the long term and I don’t think it would have gone so well for Walmart, either.

My view? Good move.

Max Goldberg
Guest

My recent experience with Walmart’s third-party sellers is that many are companies from Asia that I don’t trust or wouldn’t buy from. This differs greatly from Amazon. Most of Amazon’s third-party sellers are U.S. based and Amazon customers are protected by Amazon’s customer service policies. Walmart.com has become a mish-mash of sellers — it has grown seemingly without a strategy for sellers or consumers.

Chris Petersen, PhD.
BrainTrust

Amazon and Alibaba have become the defacto marketplace ecosystems with millions of SKUs. Even with the concept of long tail, there is a law of diminishing returns in terms of overwhelming customers with too many options. Walmart needs to find the right balance between curating SKUs and adding breadth required to attract new customers. As with everything in today’s marketplace, this is a process of constant iteration and analytics.

Steve Montgomery
BrainTrust

While a few have succeeded at trying to be all things for everybody, for most it is a path to failure. Walmart may have elected to devote more bandwidth to its own brands and/or to determining what is working and not working with the third-party sellers it already has. The one thing that is certain is that it has a rationale for doing what it is doing. Electing not to openly share that with the world is a good business decision although the stock market may not agree.

Byron Kerr
BrainTrust
Byron Kerr
Head of Amazon, Tuft & Needle
4 months 4 days ago

Customers are starting to look for curated products that suit their needs. If people wanted confusion, they’d go to malls. Amazon’s marketplace has been overrun with low-quality products as of late as the floodgates opened to Chinese sellers with direct access to the marketplace, driving low margins and poor customer service for many.

I believe Walmart wants to ensure they are not selling every and anything and a more pragmatic approach to growth that will allow the platform to still remain viable, three, five or 10 years down the road. That mixed with the growth of their own high growth brands requires striking a fine balance for longer-term growth.

If Walmart wants to bring in more brands like Lord & Taylor, they have to go against the grain and ensure a clean, viable platform — the version Amazon “hopes” to become but hasn’t, causing many luxury brands and mass retailers to ignore.

Quality over quantity — who would’ve thought!

Art Suriano
BrainTrust

I think Walmart is continuing to do many things right. If they are slowing down adding third-party sellers to their marketplace, they’re probably seeing that overcrowding their business with too many choices will not benefit the sellers they already have. It may be temporary as they figure out a strategy that will benefit everyone. I am not concerned about Walmart because they seem to have their pulse on precisely what they are doing. I especially like that when testing something they are quick to make adjustments to make sure customers are getting what they want.

Lyle Bunn (Ph.D. Hon)
BrainTrust

The slowing of adding new sellers simply acknowledges that there is no need for adding bureaucracy as a perpetual program. Taking a campaign approach has meant that minimal effort has been expected to get maximum results. It is business growth 101 and hats off to the marketplace group for their “git ‘r done” style.

Phil Masiello
BrainTrust

More than 50 percent of the Amazon.com sales come from third-party sellers. Third-party sellers provide variety, which drives users, which drives sales, which lowers costs, lowers prices and drives more users. The downside, as Amazon learned, is the proliferation of counterfeit products and artificially low prices.

Walmart needs third-party sellers and they need more of them to improve their variety and increase their traffic and sales. But they need to control them. This slowdown may be a result of taking steps to put controls into place. But if they are going to compete in a stronger way, they need third-party sellers.

Ryan Mathews
BrainTrust

The problem with an infinite shelf is that … well … it’s infinite, and that might just be too much of a good thing. If this is true, Walmart may be placing bets on quality of offering rather than quantity of SKUs — at worst a logical bet. There have to be some guard rails when it comes to adding online third parties, and no doubt Walmart is testing exactly where they are. As to whether or not the strategy is sound, remember, Walmart enjoys a much larger margin of error when it comes to testing approaches than most companies do, so they can invest in getting it right. That said, the proof is in the performance, so we will see how well Walmart’s experiment works out.

Christopher Jordan
BrainTrust

They are pulling back on the everything-and-anything SKU strategy. It intuitively makes sense in the context of Mark Lore and team’s strategy.

The “breadth at all cost” expansion plan Walmart had been following pre-Lore results in Walmart stuck in a position of Amazon Light. There was no point of competitive differentiation and Amazon had a ~5 year head start.

I believe the new plan is still about the long tail, though now there’s a clear market position (unique, curated, in some cases exclusive assortment) — which ties in nicely with the Bonobos, Modcloth, etc. acquisitions.

Doug Garnett
BrainTrust

We have finally arrived at the point where the error of the “infinite aisle” theory is becoming clear. And let’s not just point to Walmart. Amazon is pushing hard on smaller sellers and many of its suppliers to reduce their roles.

Besides the fact that “infinite aisle” is a dystopian phrase, in truth it’s hard to manage and subject to the laws of diminishing returns.

So does this show a problem with Walmart’s strategy? Not in any sense. It shows me that Walmart’s being smart about e-commerce rather than getting distracted by theory.

Cynthia Holcomb
BrainTrust

Sounds like the e-commerce reset button has been pushed at Walmart. Chasing third-party sellers? Is that really a Walmart brand for the future? Amazon is filled with redundant offerings of the very same product. Is this the game Walmart wants to play? It seems the folly of chasing third-party vendors struck a chord within Walmart.

Walmart the brand has made tremendous progress resetting their brand nationally with consumers. Walmart is at the beginning of a huge opportunity, redefining its brand; the Walmart brand. With 5,000-plus stores, cash and a new mindset, Walmart could craft version 2.0 of a vast curated marketplace surpassing the Amazon “flea market.” To do so, Walmart will need to focus on the creation of their brand point-of-view in all products, merchandising and in-store customer experiences.

Camille P. Schuster, PhD.
BrainTrust

Acquiring digital companies that need to be integrated into Walmart’s e-commerce logistics and adding third-party sellers that have to be monitored because they will impact Walmart’s image, and keeping true to Walmart’s image, is a challenging balancing act. The integration process is not automatic and takes time. Moderating the pace of acquisition is not surprising. Added to all of this, Walmart must answer another question: does Walmart choose brands for its consumers or does Walmart choose third-party companies and offer their products?

James Tenser
BrainTrust

Wise move by Walmart.com to rein in its ecosystem of third-party sellers. Quality and reliability should take precedence over sheer scale and breakneck pace — in fact, those values may be mutually exclusive to a degree.

Amazon and Alibaba may each follow a different path. So be it. Walmart should project and protect its brand reputation in its own way. Lore’s comments last month about acquisitions suggest Walmart.com is assembling a house of brands, not an electronic swap meet. That’s a distinct strategic difference.

Ken Morris
BrainTrust
I suspect that there have been some underlying issues that are driving Walmart to slow down the addition of sellers on its marketplace. The statement that Walmart is “focused on adding the best items our customers want from the best sellers” implies that customers may have experienced some bad experiences with product quality or deliveries from third party sellers on the Marketplace. Managing the quality of many thousands of third-party sellers is a daunting task and any missteps impact consumers’ perception of the Walmart brand. Amazon has done a good job of standing behind the quality of its sellers and make it easy to return unsatisfactory or damaged goods – typically with free shipping. Another reason behind this is that Walmart is now focusing on margin and not simply sales. Retailers focus on making money and selling other peoples products while increasing sales erodes margin. I believe the increased focus on margin is the right step for shareholders. Walmart’s slowdown of adding sellers may be temporary, as they may be retooling some of their seller… Read more »
wpDiscuz
Braintrust
"I think the problem with having too many sellers in your marketplace is quality control. So I think it's a very good move."
"This slowdown may be a result of taking steps to put controls into place."
"Another reason behind this is that Walmart is now focusing on margin and not simply sales."

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